In Texas, the standard contract to purchase a home gives the buyer a choice to purchase the home in its present condition (“as is”) or purchase in its present condition, except for specific items the seller will repair. Unless there is something specific known at the time of the offer, most buyers mark the “as is” box.
The contract also includes an optional option period. During the option period, the buyer has an opportunity to discuss the potential home with an insurance agent and have the home inspected and tested. Prior to the end of the option period, the buyer will generally propose an amendment to the contract as a result of the information gathered after the contract was executed. And, a new round of negotiations occurs prior to the end of the option period. If the buyer is not satisfied with the seller’s willingness to resolve issues, the buyer can walk away and still receive the earnest money deposit.
From the insurance agent, pricing for homeowners and flood insurance should be obtained. In many parts of Houston, a flood plain elevation certificate will have to be obtained to price the flood insurance. An elevation certificate can be produced by a surveyor if the sellers do not have one. A CLUE report can also be obtained by the insurance agent summarizing prior damage claims on the home. Flood insurance pricing and prior claims are the two key pieces of information needed during the option period.
One or more inspectors should evaluate and test the property. The most important issues for the inspectors in the Houston area are:
Wood Destroying Insects – Most homes of any age and a few new ones will have been exposed to termites and other wood destroying insects. Ensuring the infestation is not active is key.
Foundations – Most of Texas for over 100 miles from the coast is a build-up of sand and dirt. As a result, foundations are not built on rock and after a period the foundations must be repaired. In general, the older the home, the more likely the foundation will need repair or have been repaired in the past.
Drainage – Most Houston homes need to drain from the back to the front and will need a path or drainage system for that to occur. Poor drainage can lead to wood rot, landscape issues and mold issues.
Electrical and wiring – Evaluating whether the electrical system and wiring are working properly, are adequate for the buyer’s needs and are up to date are major concerns as issues can lead to fire hazards.
Under slab plumbing – In homes built before the mid-1970s, cast iron pipe may have been used. The pipes should be inspected for blockage and leaks. The cast iron pipe will likely have to be replaced at some point.
Stucco – Because of the humidity and wetness in the Houston area, stucco should always be tested and inspected for leaks and water penetration.
Other – Roof age and condition, and adequacy of heating and air conditioning equipment are areas of concern.
In selecting an inspector or inspectors, each of these areas should be addressed. Once the buyer knows all the issues, determining a final negotiating stance during the option period can be finalized.